“This season is characterized by continued peak spending, low, flat inflation, and higher productivity.” - Harry S. Dent, Jr.

The second season of an 80-year economic cycle is the Growth Boom, which divides into two distinct phases, Growth Boom phase one and Growth Boom phase two. The second phase of a Growth Boom shares some similarities with the first phase, but it also presents some new investment opportunities.

As members of the innovative generation enter their late thirties and forties, they are still in the midst of their peak spending years but the nature of their expenditure changes somewhat. Inflation rates, which had been falling through the first part of the Growth Boom, now stabilize and we enjoy low, flat rates through the end of this phase. Productivity is enhanced in two ways. First, the technologies this innovative generation introduced produce radically new business models, which increase the overall productivity of the economy. Second, workers who are now highly trained reach their most productive years.

The second phase of the Growth Boom is one of only two economic seasons in which small company stocks as well as large company stocks are a great investment.

We entered the second phase of the current Growth Boom in 2001. As you can see in the chart below, productivity and spending continued their rise, and the economy as a whole continued to boom until the crash in late 2007.

Click chart for larger view

This season is the time to divest yourself of bonds and buy high-end residential and resort real estate.

One of the investment opportunities during the second phase of the Growth Boom was resort and high-end real estate, which was in high demand because of the affluence and tastes of the aging consumer population. The financial meltdown of 2007-2009 absolutely decimated these sectors, providing opportunities for value investors to buy the best properties with favorable demographic trends supporting demand.